To enable you to work this out, you first need to know what your total available funds are and then subtract the cost of moving home. Start
by putting some simple figures down on paper, such as:
- Savings or assets you have available (not relating to your existing house)
- The maximum mortgage payment you can comfortably afford
Then you need to work out the cost of moving house:
- What selling your property will cost (estate agents typically charge between 1%-1.5% of the property value)
- What buying your new house will cost (mortgage fees charged by the lender, solicitors costs, removal lorries, etc)
Selling your property
Once you’ve worked out the costs for each of the categories above, you can start looking at how much money you will have available from the sale of your existing property. So,
- What do you think your house will sell for?
- What do you still owe on your current mortgage?
The first figure can be obtained, by getting at least three quotes from estate agents. Finding out what you still owe on your current mortgage is simply a matter of calling and asking your lender directly.
Things to consider
Traditional financial wisdom recommends your monthly mortgage payments are no more than a third of your monthly net income (i.e. what you take home after tax). We don’t want to sound patronising but we can’t stress enough how important it is not to overstretch yourself.
Remember, if interest rates start to increase, you need to ensure that you can still afford the monthly mortgage payments. A mortgage adviser will be able to provide you with different figures depending on rate rises.
Potentially you could borrow anywhere between 3 – 5 times your salary (if you’re buying as a couple or with a partner, both incomes can be used).
Each lender is different and with thousands of different mortgages available, it pays to get the right advice.
The quickest way to discover the maximum you can comfortably borrow is by speaking to an experienced “comprehensive” mortgage broker, such as ourselves, and getting them to check out all available mortgage deals, that way you can be sure you get the cheapest deal.